Weighing the Options of Refinancing

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Some have said that only when your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That could have been valid a while back, but with refinancing dropping in cost in recent years, it's a good time to explore the options of a new mortgage! A refinance can be worth its cost many times over, because of the advantages that can come, as well as a reduced interest rate.

Advantages

When you refinance, you might be able to reduce the interest rate and monthly payment , perhaps by a lot. You might also have the ability to "cash out" some of your equity, that you will be able use to consolidate debts, add on to your home, or plan a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by switching to a shorter-term loan.

Expenses and Fees

All these advantages do come with some expense, though. You will be charged the same sort of fees as you did with your current mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might look into paying points to reduce your interest rate. When you pay (on average) 3% of the loan amount at the start, your savings for the term of the refinanced mortgage loan can be substantial. We recommend that you consult with a tax professional before acting on advice that any paid points may be deducted on your federal income taxes.

Another thing about taxes is that once your interest rate is lowered, it follows that you will also be lowering the interest amount that you can deduct from your federal income taxes. This is another expense that borrowers take into consideration. Call us at 701.222.0100 to help you do the math.

Most borrowers find that the monthly savings quickly balance out the up-front expenses of a refinance. We will help you determine what program is the ideal fit for you, considering your cash on hand, how likely you are to sell your home in the next few years, and what effect refinancing might have on your taxes. Call us at 701.222.0100 to get you started.

Want to know more about refinancing? Call us at 701.222.0100.

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